The capital gains tax deduction rate for overseas stocks under South Korea’s return-to-domestic-market account (RIA) will be lowered to 50 percent from 80 percent from the end of this month. An assessment is emerging that even its impact has been more limited than expected.

The Financial Supervisory Service recently informed investors that when selling overseas stocks through an RIA, the deduction rate is determined based on the settlement completion date of the sale, not the trade execution date.

It stressed that, as overseas stocks can have a settlement lag ranging from T+1 to T+3 depending on the market, investors must check the settlement completion date with their brokerage firm.

The deduction rate for capital gains on overseas stocks is currently 80 percent through the end of July, but will be reduced to 50 percent from August through year-end. As a result, even if an investor sells overseas stocks on July 31, a 50 percent deduction rate applies if settlement is completed in August. Conversely, settlement must be completed within July to receive the 80 percent deduction benefit.

RIA is a scheme under which investors can receive a reduction in capital gains tax on overseas stocks by transferring overseas stocks acquired by Dec. 23, 2025 into the account and selling them, then investing the sale proceeds for 1 year in domestically listed stocks, domestic equity funds or deposits.

However, to receive the tax benefit, the sale proceeds must be managed within the account for at least 1 year. If investors net-buy overseas stocks in other accounts, part of the deduction benefit may be reduced.

In the early period after launch, it rapidly increased subscribers by highlighting the large tax benefits. According to the Financial Supervisory Service, as of end-June, cumulative RIA subscription accounts totaled 313,594 and total balances were tallied at 2.66 trillion won. Compared with end-March, shortly after launch, when there were 83,035 accounts and 414.0 billion won, both the number of accounts and balances increased sharply.

But as the tax benefits have been reduced in stages, the growth trend is slowing noticeably. Subscription accounts rose to 313,594 at end-June from 276,609 at end-May, but stood at 321,034 as of the 10th, meaning accounts increased by only 7,440 in about 2 weeks.

Balances instead fell. Total balances were 2.66 trillion won at end-June, but stood at 2.43 trillion won as of the 10th, down by 229.8 billion won.

In the early stage after launch, investments in overseas big tech appeared to flow into domestic semiconductor shares and exchange-traded funds (ETFs). According to the Korea Financial Investment Association, top overseas stocks sold included Nvidia, Tesla, SOXL and TQQQ, while in Korea investors were found to have mainly bought Samsung Electronics, SK Hynix and the KODEX200 ETF.

But with volatility in the South Korean stock market recently increasing, preference for overseas investment appears to be reviving. According to the Korea Securities Depository, net purchases of U.S. stocks by South Korean investors totaled about $2.88 billion, or about 4.26 trillion won, through the 21st of this month.

An analysis says that as the correction in the domestic stock market continues, money is again moving back, centered on U.S. technology stocks.

The industry is offering an assessment that RIA played a role in channeling part of overseas investment funds into the domestic stock market, but its policy effect was limited.

That is because while subscription accounts steadily increased, balances fell as tax benefits were reduced and the domestic stock market corrected, and investment preference for the U.S. stock market is still continuing.

A financial investment industry official said, "RIA is a useful scheme for investors seeking to reduce taxes, but it did not lead to a catalyst for overseas investment funds to move to the domestic stock market on a large scale." The official added, "Volatility in the domestic stock market is recording an all-time high, so the number of investors leaving the domestic market could increase for the time being."